Expanding the VITA Scope for the Self-Employed Tax Year 2011 Schedule C VITA Pilot Year 2

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1 Expanding the VITA Scope for the Self-Employed Tax Year 2011 Schedule C VITA Pilot Year 2 SETI CFED s Self-Employment Tax Initiative (SETI), the National Community Tax Coalition (NCTC) and the IRS Stakeholder Partnerships, Education and Communication (IRS-SPEC) teams have worked together for the past two years to implement a pilot initiative testing the viability of expanding the parameters of Volunteer Income Tax Assistance (VITA) programs to include broader Schedule C preparation. During the first year of the pilot, twelve community-based tax preparation providers delivered tax assistance to low-income self-employed tax filers. The success of the pilot in tax season 2011 led to the extension of the program into the 2012 season and brought with it four additional community-based tax preparers. This report documents the data collected by the sixteen Schedule C VITA Pilot organizations that served over 9,000 self-employed tax filers during tax season What is VITA? Volunteer Income Tax Assistance (VITA) is an IRS-sponsored, communitybased program designed to help low- and moderate-income taxpayers complete their annual tax returns at no cost. Each year, thousands of volunteers are trained and certified to prepare millions of income tax returns at more than 12,000 VITA sites across the country. In tax season 2011, VITA programs filed nearly 150,000 Schedule C or C-EZ forms for self-employed taxpayers. Background Currently, IRS policy defines a scope of tax preparation services that VITA programs can offer and for which volunteers can become certified. These parameters were created in order to guarantee the quality of returns filed and to ensure that volunteers, time and resources are maximized to help low-income families comply with their tax liabilities and access the tax credits for which they are eligible. Schedule C is the form on which self-employed taxpayers report their income and some expenses. Beyond certain very basic, limited circumstances, Schedule C is out of scope for VITA programs and filers with business income are often turned away. The Schedule C VITA Pilot has allowed participating VITA programs to expand their services to include broader Schedule C preparation during the 2011 and 2012 tax seasons. For more detailed background information on the Schedule C VITA Pilot, see the Tax Year 2010 Final Report. To learn more about the significance of scope expansion, take a look at The VITA Value Proposition: Expanding Free Tax Assistance Program Parameters to Empower More Low-Income Microbusinesses. The Partners In 2010, SETI, NCTC and IRS-SPEC successfully partnered to develop a framework and parameters for the first year of the Schedule C VITA pilot and to identify experienced community-based VITA programs this framework was updated for the 2012 tax season. In preparation for and throughout the tax season, SETI, NCTC and the sixteen local partners participated in monthly conference calls to discuss planning, pilot parameters, data collection, testing 1200 G Street Suite 400 Washington, DC

2 requirements, training techniques and a range of other topics. The local partners also shared Schedule C training materials, intake tools, assessment and quality review forms, tax filer organizers and other materials throughout the planning period. Those materials have been collected and are catalogued on the SETI Resource Bank website, an online compendium of strategies and tools for leveraging tax time to empower entrepreneurs. SETI works to ease the tax challenges faced by low- and moderate-income business owners who are pursuing economic success through entrepreneurship by supporting programs that offer tax assistance, promoting sound policy and conducting research. Over the past six years, SETI has partnered with local non-profit tax preparation services that have prepared business tax returns for over 45,000 low-income business startups. Between CFED ran the SETI Demonstration to test out this approach on the ground. Visit us at for more background. NCTC is the nation s largest, most comprehensive membership organization for community-based organizations offering free tax and financial services to low-income working families. NCTC is dedicated to strengthening economies, building communities and improving lives through tax assistance and asset building activities that produce financial security, protect families, and promote economic justice. IRS-SPEC is the outreach and education function of Internal Revenue Service s Wage and Investment Division. SPEC s mission is to assist taxpayers in satisfying their tax responsibilities by building and maintaining partnerships with key stakeholders who also seek to create and share value by informing, educating, and communicating with their shared customers. The Schedule C VITA Pilot Local Partners are sixteen organizations operating VITA sites with experienced volunteers and staff with the skills and knowledge to file Schedule C tax returns. Each of the programs participating demonstrated a commitment to low-income self-employed clients, asset-building and quality tax assistance. All of the local partners either participated in the SETI Demonstration between the 2005 and 2009 tax years or are NCTC affiliates. Table 1: Schedule C VITA Pilot Local Partners Schedule C VITA Pilot Local Partners Location Number of Sites Reporting Real $ense Prosperity Campaign Jacksonville, FL 24 El Paso Affordable Housing M El Paso, TX 21 East Bay Asian Local Development Corporation Oakland, CA 2 Rural Dynamics, Inc. Great Falls, MT 40 Just Harvest Education Fund* Pittsburgh, PA No Data Colorado East Community Action Agency M, NEW Stratton, CO 3 United Way of Central Alabama M, NEW Birmingham, AL 2 Foundation Communities Austin, TX 10 KC CASH Coalition, Inc. Kansas City, MO 2 Accounting Aid Society Detroit, MI 23* Center for Economic Progress M Chicago, IL 12 AccountAbility Minnesota M St. Paul, MN 12 St. Mary s University San Antonio, TX 1 Tax-Aid NEW San Francisco, CA 1 Atlanta Prosperity Campaign NEW Atlanta, GA 39 Campaign for Working Families Philadelphia, PA 14** M Those organizations marked with an M also operate mobile tax preparation units. NEW Those organizations marked with NEW were added to the pilot for the 2012 tax season. *All 23 of Accounting Aid Society s sites prepare Schedule C-EZs, but only 5 of those sites prepare full Schedule Cs. **All 14 of Campaign for Working Families sites prepare Schedule C-EZs, but only 3 of those sites prepare full Schedule Cs. Page 2 Expanding the VITA Scope for the Self-Employed: Tax Year 2011 Schedule C VITA Pilot / Year 2

3 Pilot Parameters The sixteen local partners delivered Schedule C tax assistance to income-eligible taxpayers with self-employment income during the 2012 tax season. The parameters created for the tax year 2010 pilot were altered for the second year and only self-employed filers who fell within the guidelines below were eligible to receive assistance at Schedule C VITA Pilot sites: Business expenses up to $25,000 Business losses confined to a single tax year and with no carry back or carry forward Business use of the home was limited to childcare providers that either rent or own their homes Section 179 depreciation only so long as total business expenses did not exceed $25,000 Limited Modified Accelerated Cost Recovery System (MACRS) deductions No businesses with inventory No Net Operating Losses (NOLs) Only cash basis taxpayers No businesses with employees IRS Oversight & Accuracy Many of these programs operate numerous VITA sites, but only up to three sites per organization a total of 46 sites, including one mobile site were subject to IRS oversight through visits to observe Schedule C volunteer trainings and to review Schedule C tax preparation during the season. Members of the IRS-SPEC team, comprised of SPEC headquarters and field employees, observed nine training classes, including one web-based curriculum. They visited at least one VITA site per organization, for a total of 15 visits, and conducted 19 Schedule C Return reviews. 94.7% Accuracy Rate Only one of the nineteen Schedule C returns reviewed by IRS staff was inaccurate Site Procedures To compensate for the fact that more time and attention are required to complete a return for a self-employed taxpayer than for a wage-earning filer, many sites have designed intake procedures including phone interviews, intake sheets, recordkeeping tools, pre-screenings for appointments and so on to gather more detailed information about their Schedule C filers to guarantee that their filing needs fit the pilot parameters. To see how programs accommodated self-employed taxpayers whether by appointment, as walk-ins or on a designated day see Table 3 in Appendix. Most programs also take time after preparing taxes to educate their Schedule C clients about the importance of detailed recordkeeping throughout the year, and many offer additional tools organizers, expense trackers, additional classes, and IRS publications and advise filers to use them to prepare for the upcoming year. Tax Preparers Each local partner agreed to secure experienced paid staff or volunteers to prepare Schedule C returns. All preparers are required to participate in a Schedule C Training, successfully complete the VITA Certification Test at the Intermediate Level and pass the Schedule C certification test designed by the IRS with local partner representatives. Three of the local partners utilized all volunteer preparers, while the rest split the workload between volunteers and paid staff (See Table 2 in the Appendix). 59% Volunteer Preparers 41% Paid Staff 0% 25% 50% 75% 100% Expanding the VITA Scope for the Self-Employed: Tax Year 2011 Schedule C VITA Pilot / Year 2 Page 3

4 TAXPAYER PROFILE Who Was Served? 9,063 Self-Employed Taxpayers 75% with AGI below $30,000 INCOME Under $5,000 $5,000 - $15,000 $15,001 - $30,000 $30,001 - $40,000 $40K - $50K > $50,000 0% 25% 50% 75% 100% How many taxpayers filed on Schedule Cs or C EZ? On average, about two thirds of the self-employed taxpayers served by the pilot sites reported their income on a Schedule C EZ, while the rest filed on a C. Taxpayers can report profit or losses from self-employment on either a Schedule C or C EZ form. The Schedule C EZ is a simplified form of the Schedule C, and in order to file on a Schedule C EZ taxpayers must not exceed certain eligibility requirements. Among other limitations, Schedule CE Z filers must have business expenses below $5,000, use the cash accounting method and have no inventory during the year. Schedule C Schedule C EZ AAM AP AAS CWF CEP CECAA On average, how many self-employed taxpayers were male and how many were female? EBALDC EPAH FC JHEF No Data KC CASH RDI St. Mary s Real$ense Tax-Aid 55% 45% Male Female UWCAL Number of Returns Filed Page 4 Expanding the VITA Scope for the Self-Employed: Tax Year 2011 Schedule C VITA Pilot / Year 2

5 ETHNICITY White Black Asian/Pacific Islander Latino/Hispanic Native American Other 0% 25% 50% 75% 100% AAM AP AAS CWF CEP CECAA EBALDC EPAH No Data for Other Ethnicities FC JHEC No Data KC CASH RDI St. Mary s Real$ense Tax-Aid UWCAL 0% 25% 50% 75% 100% Expanding the VITA Scope for the Self-Employed: Tax Year 2011 Schedule C VITA Pilot / Year 2 Page 5

6 On average, 34% lived in households where another language besides English is spoken. The demographic and linguistic characteristics of filers served at these sites varied by organization and mirrored certain regional or local demographics. For instance, in San Antonio, Austin and El Paso, Texas, local partners served large populations of Latino/Hispanic taxpayers and catered to many Spanish-speaking clients by translating their tools and materials and providing bilingual tax preparation volunteers. This prevalence of self-employed filers for whom English is likely a second language highlights the need for enhanced IRS educational outreach in immigrant communities, more bilingual tax assistance and better access to business development materials in multiple languages. 100% 50% 0% No Data AAM AP AAS CWF CEP CECAA EBALDC EPAH FC JHEF KC CASH RDI St. Mary s Real$ense Tax-Aid UWCAL This age breakdown is consistent with the filers served during the first year of the Schedule C VITA Pilot and during the SETI Demonstration from tax season 2006 through AGE Under Over 65 0% 25% 50% 75% 100% FILING STATUS Filing status gives some insight into taxpayers family structures. It is important to note the high rate of single filers because by and large, single filers are not eligible for the EITC because they do not have dependents, even though they may be low-income. This is one reason why EITC claim rates are not higher (see Table 11 in the Appendix). Single Married Head of Household 0% 25% 50% 75% Married Filing 100% Separately Page 6 Expanding the VITA Scope for the Self-Employed: Tax Year 2011 Schedule C VITA Pilot / Year 2

7 TAXPAYER CHALLENGES What Key Challenges Did Self-Employed Taxpayers Face? aformalization Many new entrepreneurs do not even realize when they cross a business-defining legal threshold until they are informed of their tax liability. aself-employment Tax Burden Many self-employed filers learn for the first time that they must pay payroll taxes as both an employee and employer when they first file an annual tax return documenting their business income. amisclassification Our local partners encounter many taxpayers reporting self-employment income who are actually misclassified employees. In these situations, local pilot sites educate the taxpayers about the implications of filing as self-employed and their opportunities for rectifying their misclassification. Though these filers are not intentional entrepreneurs, they may benefit from the same suite of services offered to self-employed filers at the sites participating in the pilot. In some instances, this misclassification could have skewed the tax penalty data. atax Penalties Because self-employment taxes are due quarterly over the course of the year in which they are incurred, filers who were unaware of their tax responsibility and receive assistance at pilot programs often owe a penalty in addition to the taxes due for the previous year. On average, 19% of self-employed filers owed some kind of tax penalty this year. This represents an overall 7% increase from tax year 2010 and demonstrates the need for additional business development services, recordkeeping training and other counseling at pilot sites. The following illustrates the change in tax penalties at pilot sites participating for a second year in (where data was available for both TY 2010 and 2011). Note: An acceptable proxy for whether or not clients owed tax penalties was whether clients owed more than $1,000, given the likelihood that clients owing more than $1,000 at filing have not met their quarterly obligations throughout the year, which typically garners a penalty. % of clients owing tax penalty 50% 37.5% 25% 12.5% 0% AAS CWF CEP EBALDC FC KC CASH St. Mary s Real$ense TY 2010 TY 2011 Page 7 Expanding the VITA Scope for the Self-Employed: Tax Year 2011 Schedule C VITA Pilot / Year 2

8 TAXPAYER OPPORTUNITIES What Key Opportunities Did Pilot Sites Offer the Self-Employed? a Free Tax Help Free tax assistance helps low- and moderate-income self-employed taxpayers comply with their tax liabilities without having to pay exorbitant fees to a commercial tax preparer. Many times, selfemployed clients visit VITA programs after having been to paid preparers in the past; they find improved quality assistance and additional opportunities to learn about how to improve their businesses for the future. The VITA Difference At the Center for Economic Progress (CEP) this year, a Mandarin-speaking client came to have his Schedule C return prepared for a small bodega that he operated in Chicago s Chinatown. Working through an interpreter, the volunteer preparer learned that the client wanted the return prepared similar to the year before, when he had a paid preparer who understood the way things were done in Chinatown. The volunteer preparer reviewed the prior year return and discovered many problems: depreciation on the space that the client was renting, employees treated as independent contractors, and fully expensed inventory. Because the client had employees and inventory during the year, the VITA site did not prepare the return, but did educate him about the problems with his prior year. This is just one example of how the assisted tax preparation process at VITA sites helps self-employed filers better understand their business finances and learn about their compliance responsibilities. a Access to Tax Credits Qualified filers at Schedule C VITA Pilot sites were guaranteed access to federal tax credits like the EITC and Child Tax Credit (CTC), plus some educational credits like the American Opportunity Tax Credit or the Lifetime Learning Credit, offering injections of income that may be used to reinvest in their microbusinesses or support their households. The percentage of taxpayers receiving EITC and CTC dropped from tax year 2010, from 56% and 31% respectively. EITC 49% and collected an average EITC of $1, received the Earned Income Tax Credit Expanding the VITA Scope for the Self-Employed: Tax Year 2011 Schedule C VITA Pilot / Year 2 Page 8

9 CTC 20% and collected an average CTC of received the Child Tax Credit $1, a Better Understanding of Business Finances The tax filing moment is a natural learning opportunity for many microbusiness owners who might struggle to master their business finances as easily as they mastered their craft. At tax time, business owners must think through and document each component of their operations as they compute the year s income and expenses on a Schedule C or C EZ form. For Many Small Business Owners, VITA Offers Peace of Mind Starting my own business has been a difficult but rewarding journey, said Jennifer, a self-employed taxpayer at AccountAbility Minnesota (AAM) in Minneapolis. For the first two and a half years I struggled but things have really been picking up over the last few months. I feel confirmed in my decision to go out on my own and AAM has been a part of making that happen. After being laid off from her full-time corporate job three years ago, Jennifer, a writer and communications consultant, decided she wanted to be her own boss and start her own business. When Jennifer was in the initial stages of starting her business she attended a small business class at a local nonprofit where Tom Larson, AccountAbility Minnesota s self-employment program manager, was an instructor. During the class Tom shared information about AccountAbility Minnesota s work with small business owners helping them to understand their complicated tax obligations and instructing them on how to set up an effective and efficient way to track their business activity. It did not take long for Jennifer to get in contact with Tom to sit down with him to discuss her freelance writing and communications consulting business. Tom walked her through her tax requirements as a soleproprietor. He also gave her tools and resources to track her income and expenses. Additionally, he helped her identify those business expenses that qualify as deductions. As a result, Jennifer felt more empowered as a small business owner understanding what it takes from a tax and financial perspective to be a successful business owner. It s a huge service for a struggling small business owner like myself where you are just trying to cobble together an income where it s usually week to week and month to month, said Jennifer. Just knowing that a service like this is available takes off a huge amount of pressure, and it always feels very professionally done. Before finding AccountAbility Minnesota, Jennifer was going to a commercial preparer to have her taxes done, spending an exorbitant amount and never feeling educated on the process or what was being done. When asked how she was spending her refund, Jennifer immediately said saving it! She is not unlike many of AccountAbility Minnesota s customers who strive to build a nest egg for themselves a cushion against emergencies. Page 9 Expanding the VITA Scope for the Self-Employed: Tax Year 2011 Schedule C VITA Pilot / Year 2

10 a Additional Wrap Around Services Most of the local partner organizations offer additional financial education or asset-building services to their clients at tax time (see Table 13 in the Appendix). The pilot partners were also committed to helping first-time Schedule C filers calculate and submit their estimated taxes for the upcoming tax year. The basic premise behind the Self-Employment Tax Initiative is that self-employed taxpayers can improve their household financial security and eventually build wealth through the combined effects of receiving free assistance, filing accurate tax returns, accessing state and federal tax credits, learning about the intricacies of their businesses finances and being introduced to additional asset-building and business development business services. The following is one indicator that at least one outcome - income - did improve for self-employed taxpayers served by the pilot sites. 43% of all self-employed filers were returning for a second year 52% of return filers increased their incomes from previous year 0% 25% 50% 75% 100% A Baker s Business Grows One of the East Bay Asian Local Development Corporation s (EBALDC) clients exemplifies the power of making a robust set of services available to low-income entrepreneurs. This client, who we will call Mary, is a baker who went through a small business development workshop with a local organization that helps women launch their own businesses. Upon graduation from the course, Mary turned her love of making fabulous cakes into a small enterprise using funds from an Individual Development Account. For the last two years, Mary has had her taxes prepared at EBALDC. In 2010, Mary filed a form Schedule C-EZ with a net profit of $45 and received a federal tax refund of $1,211. In 2011, Mary filed a form Schedule C with a net profit of $1,554 and received a tax refund of $873. Both years Mary deposited her refund directly into her Individual Development Account. She has finally saved enough to open a store front for her business. Mary exemplifies how entrepreneurs can leverage a variety of services from various organizations to build their own financial stability. The Schedule C Pilot has allowed EBALDC to work with Mary from the infancy of her business through its adolescence. Expanding the VITA Scope for the Self-Employed: Tax Year 2011 Schedule C VITA Pilot / Year 2 Page 10

11 Taking Advantage of Wrap Around Services Veronica is a Foundation Communities resident who has her taxes prepared at the Community Tax Centers in Austin, TX. She also attends money management and homebuyer classes, receives financial coaching, and opened an IDA to purchase her first home. She is a Spanish-speaking legal permanent resident, which is relevant only in demonstrating her determination and how goal-driven she is. After fleeing a domestic violence situation, Veronica began supporting her family by styling hair. She began by renting a chair at another stylist s salon, but soon decided to branch out on her own. Veronica changed the purpose of her homeownership Individual Development Account (IDA) to start her own business. She located and leased a building for her own salon; the building owner told her she would have to get insurance and utility services and make any required repairs, and that she was on her own to figure out how to do all that. Through pure grit, determination, no fear of asking questions and attending classes, Veronica did indeed figure it all out. She got free legal help to review her lease, purchased business insurance, painted inside and out of the building, had electric wiring installed, installed new flooring herself, purchased two new barber chairs, wait chairs, signs for her business, supplies and materials. She did all this with an IDA containing $4,000 - today, that IDA still has a balance of $300. Foundation Communities helped with getting accurate tax returns prepared and filed; coaching to assist with budgets, both personal and business; and setting up a record-keeping system. But it is Veronica s tenacity that makes her so successful. In the middle of starting up this new business, Veronica noticed a lump in her cheek which turned out to be malignant. While chemo has slowed her down a bit, there is no stopping her - she recently hired a couple of employees to help her with customers on days she is unable to stand for long periods. Her goal is continued growth of her business and getting her daughters through college. Conclusion The second year of the Schedule C VITA pilot confirmed the need and capacity for expanded scope of Schedule C preparation, which would allow VITA to reach a broader audience of low-income Schedule C filers. There is plenty of demand for this service: of the 20 million American tax payers who file a Schedule C each year, 60% have adjusted gross incomes below $50,000. The invaluable wrap-around services that many sites in the Schedule C VITA Pilot offer help clients learn about compliance, better prepare for tax filing season and ultimately improve their families household financial security. For a second year, the sixteen participating organizations demonstrated that they were able to effectively deliver high-quality Schedule C assistance, track and report lessons learned and design tools for volunteer training on top of offering additional business development services to low-income entrepreneurs. About CFED CFED empowers low- and moderate-income households to build and preserve assets by advancing policies and programs that help them achieve the American Dream, including buying a home, pursuing higher education, starting a business and saving for the future. As a leading source for data about household financial security and policy solutions, CFED understands what families need to succeed. We promote programs on the ground and invest in social enterprises that create pathways to financial security and opportunity for millions of people. Page 11 Expanding the VITA Scope for the Self-Employed: Tax Year 2011 Schedule C VITA Pilot / Year 2

12 Established in 1979 as the Corporation for Enterprise Development, CFED works nationally and internationally through its offices in Washington, DC; Durham, North Carolina; and San Francisco, California. For more information about SETI, our partners and our programs, contact us at CFED recognizes the commitment of our funders to small and growing businesses and is grateful for their support of SETI. CFED gratefully acknowledges the support of our funders, including the Hearst Foundation, the Sam s Club Giving Program, the New York Stock Exchange and the Annie E. Casey Foundation. Expanding the VITA Scope for the Self-Employed: Tax Year 2011 Schedule C VITA Pilot / Year 2 Page 12

13 APENDIX Note: Just Harvest Education Fund did participate in the Schedule C VITA Pilot but is not listed on any of the following tables because data was not provided for their filers this year. Table 2. Percentage of Volunteer and Paid Staff Schedule C Tax Preparers Volunteers Paid Staff AccountAbility Minnesota 98% 2% Atlanta Prosperity Campaign 0% 100% Accounting Aid Society 8% 92% Campaign for Working Families 19% 81% Center for Economic Progress 100% 0% Colorado East Community Action Agency 25% 75% East Bay Asian Local Development Corp. 67% 33% El Paso Affordable Housing 100% 0% Foundation Communities 100% 0% KC CASH Coalition 0% 100% Rural Dynamics Inc. 98% 2% St. Mary's University 75% 25% Real$ense Prosperity Campaign 74% 26% Tax-Aid 99% 1% United Way of Central Alabama 20% 80% Average 59% 41% Table 3. How Do You Accommodate Self-Employed Filers During Tax Season? How do you accommodate self-employed filers during tax season? Organization Appointment Walk-In Designated Day AccountAbility Minnesota X X Atlanta Prosperity Campaign X Accounting Aid Society X Campaign for Working Families X X X Center for Economic Progress X Colorado East Community Action Agency X East Bay Asian Local Development Corp. X El Paso Affordable Housing X X Foundation Communities X X Just Harvest Education Fund No Data No Data No Data KC CASH Coalition X X Rural Dynamics Inc. X X St. Mary's University X Real$ense Prosperity Campaign X X X Tax-Aid X United Way of Central Alabama X Page 13 Expanding the VITA Scope for the Self-Employed: Tax Year 2011 Schedule C VITA Pilot / Year 2

14 Table 4. Tax Year 2012 Self-Employed (Schedule C and C-EZ) Returns Filed Tax Year 2011 Self-Employed Returns Filed Schedule C Schedule C-EZ Total AccountAbility Minnesota Atlanta Prosperity Campaign Accounting Aid Society ,778 Campaign for Working Families Center for Economic Progress 515 1,085 1,600 Colorado East Community Action Agency East Bay Asian Local Development Corp El Paso Affordable Housing Foundation Communities No Data No Data 1,791 KC CASH Coalition Rural Dynamics Inc St. Mary's University Real$ense Prosperity Campaign Tax-Aid United Way of Central Alabama Total 2,906 4,366 9,063 Table 5. Schedule C Taxpayer Ethnicity & Language Ethnicity White Black Asian / Pacific Islander Latino / Hispanic Native American Other Language Besides English Spoken at Home AccountAbility Minnesota 39% 17% 8% 14% 3% 19% 24% Atlanta Prosperity Campaign 25% 21% 36% 18% 0% 0% 54% Accounting Aid Society 21% 69% 1% 5% 1% 3% 5% Campaign for Working Families 13% 60% 6% 15% 2% 4% 24% Center for Economic Progress 24% 40% 7% 24% 0% 5% 40% Colorado East Community Action Agency 96% 0% 0% 4% 0% 0% 8% East Bay Asian Local Development Corp. 9% 13% 61% 8% 0% 10% 74% El Paso Affordable Housing N/A N/A N/A 73% N/A N/A 95% Foundation Communities 22% 8% 2% 60% 0% 6% 43% KC CASH Coalition 39% 31% 4% 24% 1% 1% 24% Rural Dynamics Inc. 64% 1% 1% 1% 32% 1% 13% St. Mary's University 18% 6% 1% 73% 0% 2% 54% Tax-Aid 15% 5% 9% 60% 0% 11% 35% Real$ense Prosperity Campaign 41% 41% 3% 12% 1% 2% 14% United Way of Central Alabama 53% 42% 3% 1% 0% 1% 5% Average 34% 25% 10% 26% 3% 5% 34% Expanding the VITA Scope for the Self-Employed: Tax Year 2011 Schedule C VITA Pilot / Year 2 Page 14

15 Table 6. Schedule C Taxpayer Filing Status Single Schedule C Taxpayer Filing Status Married Married Filing Separately Head of Household Qualifying Widower AccountAbility Minnesota 56% 18% 2% 24% 0% Atlanta Prosperity Campaign 25% 30% 0% 45% 0% Accounting Aid Society 59% 16% 4% 21% 0% Campaign for Working Families 50% 16% 4% 30% 0% Center for Economic Progress 55% 21% 3% 21% 0% Colorado East Community Action Agency 32% 40% 0% 28% 0% East Bay Asian Local Development Corp. 47% 36% 0% 17% 0% El Paso Affordable Housing 51% 29% 0% 20% 0% Foundation Communities 40% 36% 2% 22% 0% KC CASH Coalition 45% 35% 2% 18% 0% Rural Dynamics Inc. 50% 31% 0% 19% 0% St. Mary's University 38% 45% 1% 15% 1% Real$ense Prosperity Campaign 40% 31% 4% 25% 0% Tax-Aid 50% 30% 0% 20% 0% United Way of Central Alabama 60% 18% 1% 21% 0% Average 46% 29% 2% 23% 0% Table 7. Schedule C Taxpayer Ages Schedule C Taxpayer Age Under 25 Years Years Years Over 65 Years AccountAbility Minnesota 10% 49% 38% 3% Atlanta Prosperity Campaign 8% 48% 38% 6% Accounting Aid Society 8% 32% 49% 11% Campaign for Working Families 10% 43% 41% 6% Center for Economic Progress 10% 40% 43% 8% Colorado East Community Action Agency 8% 48% 32% 12% East Bay Asian Local Development Corp. 9% 49% 36% 6% El Paso Affordable Housing 13% 28% 57% 2% Foundation Communities 8% 54% 33% 5% KC CASH Coalition 9% 43% 38% 10% Rural Dynamics Inc. 9% 28% 47% 16% St. Mary's University 0% 48% 45% 7% Real$ense Prosperity Campaign 11% 35% 46% 8% Tax-Aid 5% 54% 40% 1% United Way of Central Alabama 11% 36% 44% 9% Average 9% 42% 42% 7% Page 15 Expanding the VITA Scope for the Self-Employed: Tax Year 2011 Schedule C VITA Pilot / Year 2

16 Table 8. Percentage of Schedule C Taxpayers by Gender Male Female AccountAbility Minnesota 41% 59% Atlanta Prosperity Campaign 65% 35% Accounting Aid Society 35% 65% Campaign for Working Families 29% 71% Center for Economic Progress 37% 63% Colorado East Community Action Agency 36% 66% East Bay Asian Local Development Corp. 41% 59% El Paso Affordable Housing No Data No Data Foundation Communities 54% 46% KC CASH Coalition 44% 56% Rural Dynamics Inc. 47% 53% St. Mary's University 51% 49% Real$ense Prosperity Campaign 45% 55% Tax-Aid 45% 55% United Way of Central Alabama 45% 55% Average 45% 55% Table 9. Schedule C Taxpayer Adjusted Gross Income < $5,000 Schedule C Taxpayer Adjusted Gross Income $5,000- $15,000 $15,001- $30,000 $30,001- $40,000 $40,001- $50,000 AccountAbility Minnesota 30% 31% 26% 8% 3% 2% Atlanta Prosperity Campaign 6% 22% 29% 24% 17% 2% Accounting Aid Society 33% 40% 20% 4% 2% 1% Campaign for Working Families 23% 37% 25% 8% 3% 4% Center for Economic Progress 24% 43% 23% 6% 2% 2% Colorado East Community Action Agency 12% 12% 44% 16% 12% 4% East Bay Asian Local Development Corp. 26% 31% 25% 12% 3% 3% > $50,001 El Paso Affordable Housing No Data No Data No Data No Data No Data No Data Foundation Communities 17% 37% 29% 9% 5% 3% KC CASH Coalition 15% 35% 24% 12% 6% 8% Rural Dynamics Inc. 20% 35% 23% 9% 5% 8% St. Mary's University 16% 41% 25% 9% 4% 5% Real$ense Prosperity Campaign 20% 31% 22% 10% 7% 10% Tax-Aid 9% 29% 49% 10% 2% 1% United Way of Central Alabama 23% 41% 25% 8% 3% 0% Average 20% 33% 28% 10% 5% 4% Expanding the VITA Scope for the Self-Employed: Tax Year 2011 Schedule C VITA Pilot / Year 2 Page 16

17 Table 10. Percentage of Self-Employed Filers that Owed a Tax Penalty for Tax Year 2011 Organization How many self-employed filers owed a tax penalty? AccountAbility Minnesota No Data Atlanta Prosperity Campaign 41% Accounting Aid Society 7% Campaign for Working Families 28% Center for Economic Progress 40% Colorado East Community Action Agency 0% East Bay Asian Local Development Corp. 48% El Paso Affordable Housing No Data Foundation Communities 12% KC CASH Coalition 10% Rural Dynamics Inc. No Data St. Mary's University 9% Real$ense Prosperity Campaign 10% Tax-Aid 52% United Way of Central Alabama 0% Average 19% Table 11. Percentage of Self-Employed Filers that Received Refundable Tax Credits and Average Amount of Earned Income Tax Credit and Child Tax Credit Refundable Tax Credits % EITC Average EITC % CTC Average CTC AccountAbility Minnesota 56% $1, % $1, Atlanta Prosperity Campaign 30% $1, % $1, Accounting Aid Society 61% $1, % $1, Campaign for Working Families 54% $1, % $ Center for Economic Progress 58% $1, % $1, Colorado East Community Action Agency 40% $2, % $1, East Bay Asian Local Development Corp. 58% $1, % $ El Paso Affordable Housing No Data $2, No Data No Data Foundation Communities 45% $1, % $1, KC CASH Coalition 42% $1, % $ Rural Dynamics Inc. 50% $1, % $2, St. Mary's University 47% $1, % $1, Real $ense Prosperity Campaign 50% $1, % $ Tax-Aid 25% $1, % $ United Way of Central Alabama 48% $1, % $ Average 49% $1, % $1, Page 17 Expanding the VITA Scope for the Self-Employed: Tax Year 2011 Schedule C VITA Pilot / Year 2

18 Table 12. Percentage of Self-Employed Filers Returning from Tax Year 2010 and Percentage of Return Filers with Increased AGI Return Clients Increased AGI AccountAbility Minnesota 57% 59% Atlanta Prosperity Campaign 40% 65% Accounting Aid Society 25% 69% Campaign for Working Families 42% No Data Center for Economic Progress 55% 29% Colorado East Community Action Agency 36% 66% East Bay Asian Local Development Corp. 54% 51% El Paso Affordable Housing 40% No Data Foundation Communities 56% 50% KC CASH Coalition 38% 61% Rural Dynamics Inc. 38% No Data St. Mary's University 30% 52% Real $ense Prosperity Campaign 42% 65% Tax-Aid 30% 20% United Way of Central Alabama 44% 41% Average 42% 52% Table 13. Types of Asset Building Services and Products Offered Organization AccountAbility Minnesota Atlanta Prosperity Campaign Business Development Services and Products Recordkeeping tools and workshops Business training courses, small business loans* Asset Building Services and Products Savings accounts, low-cost pre-paid debit cards, credit reports, pro bono financial planning* Credit reports, savings and checking accounts, retirement counseling, financial counseling, public benefit screenings, FASFA preparation Accounting Aid Society Day-care planning guide Credit reports, prepaid debit cards Campaign for Working Families Business development counseling Public benefits screening, savings bonds, low-cost prepaid debit cards, credit reports, FASFA preparation Center for Economic Progress Tax and recordkeeping workshops Savings bonds, prepaid debit cards, bank accounts, FAFSA preparation, financial coaching Colorado East Community Action Agency Tax and recordkeeping counseling Financial education courses* East Bay Asian Local Development Corp. Recordkeeping tools Savings bonds, savings accounts, prepaid debit cards, credit reports El Paso Affordable Housing Recordkeeping counseling Financial literacy materials Foundation Communities Small business loans, business development counseling and workshops* Financial counseling and education, credit counseling, FAFSA preparation, Individual Development Accounts KC CASH Coalition Recordkeeping tools Savings and checking accounts, credit counseling, financial education Rural Dynamics Inc. Recordkeeping tools Credit counseling, financial education, Individual Development Accounts, prepaid debit cards St. Mary's University None None Real$ense Prosperity Campaign Business development courses* Savings and checking accounts, Individual Development Accounts* Tax-Aid Business development workshops* Public benefits screening* United Way of Central Alabama Recordkeeping workshops Savings and checking accounts, credit counseling, Individual Development Accounts, prepaid debit cards *Services and products marked with an asterisk are offered through partner organizations, not at the sites themselves. Expanding the VITA Scope for the Self-Employed: Tax Year 2011 Schedule C VITA Pilot / Year 2 Page 18